Find your suitable insurance plan
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6 min read
If you look around for investment plans and products available in the market, you will be thrilled to explore the plethora of plans that you can invest on to secure your future as well as the future of your family members.
Among the most traditional and common of them include the Fixed Deposits and the Guaranteed Return Insurance Products such as life insurance plans. Life insurance plans, despite being an insurance product, work well as a guaranteed savings instrument for many, especially to fulfill their long-term financial goals.
Financial planning is important. When individuals plan for long-term investment plans, they sometimes cover the short-term goals as well. However, the risk that many people might come across is regarding important life events like higher education of your child, marriage of a kid or buying a house etc. Falling short of funds for such events, especially for kid’s education, can be daunting for the parents. To cover such events, short-term FDs can come to your rescue.
On the other hand, a life insurance plan, which works as a savings plan with assured returns, works great in managing your long-term financial goals. Hence, life insurance policies offering guaranteed returns are regarded as one of the best investment options. Besides, with life insurance you also get the protection of your life against sudden uncertainties, thereby allowing monetary security to your family.
In this post, we are trying to help you with more information and comparisons on the guaranteed return plans in India as well as on the fixed deposits to let you choose the better policy.
Both Fixed Deposits and Life insurance Plans offer guaranteed return on investment. FDs serve the purpose of your short-term needs, but can also help you with long-term investment goals. FDs are safe and secured options of investment that offer assured returns with fixed interest rates. The fixed deposit interest rates might range between 7 percent or more depending on the bank or financial institute that you are getting the FD from.
The tenure or duration of policy of a FD can range between 1 year (min) to 10 years (max). Hence, with FDs, one is sure to get good returns and thus they are regarded as one of the profitable options of investment, especially for buyers who do not want to take risks or chances.
On the other hand, Life insurance, of course, is an insurance product that is mainly purchased by people to offer monetary security to their family in the event of the sudden death of the policyholder. However, in addition to offering protection to your life and securing your family after your demise, life insurance also supports in fulfilling your long-term goals. Especially, if you buy a plan with the option of assured return on investment.
There are several types of life insurance plans, including Endowment plans, Money Back Policies etc. With the Money-Back Policy, the insured can avail regular income at intervals together with the death benefit. On the other hand, the endowment plans offer lump-sum corpus at maturity. Further, there are some traditional life insurance plans which allow guaranteed benefits as well as added bonus.
You may choose to invest in a traditional plan like a monthly income plan or money back plan as per your requirement. Also, you may like to choose a plan as per your insurance goals or the risk appetite along with other factors like the sum of money you want to invest and your investment prospects etc.
The best thing about these guaranteed return plans is that they offer better flexibility than the fixed deposit schemes. Another important aspect about guaranteed return insurance products is that they allow tax benefits under Section 80C and Section 10(10D) of Income Tax Act 1961.
Let us take a look at the differences between a FD and GRPs in the table below:
| Comparisons | Fixed Deposits (FD) | Guaranteed Return Insurance Plans |
| Tenure | FDs mostly suit people for both long term and short-term investments. The tenure may range between 1 to 5 years | On the other hand, Guaranteed Return policies allow life coverage and are available for 10 and more years (may be lifetime) |
| Investment | Investment in FDs can be started with a minimum sum assured of INR 1000 with no maximum limit. The bank calculates the interest as per the investment amount and duration of the FD. The longer the term, the better the returns received | In case of guaranteed return insurances like life insurance the premium amount differs as per plan. It is determined on the basis of several factors like age, sum assured, and health of insured among others |
| Guaranteed Return | Under fixed deposit plans, you are sure to get a guaranteed and fixed return on investment as mentioned at the time of opening a FD account.
|
In the case of the monthly income saving policies, you can get regular flow of money every month for your monthly expenses as well as to fulfil the short-term goals.
Further, Guaranteed return savings plans also allow better return at maturity |
| Withdrawal | There is a partial withdrawal option available under a fixed deposit plan. However, breaking a FD before its maturity period may affect its ROI. | On the other hand, life insurance policies allow the policyholder to withdraw after the 3-year lock-in period. |
| Taxation | There are no tax benefits received under Fixed Deposits | Tax benefits are available under life insurance policies on the premium amount paid to the insurer under section 80C of Income Tax Act.
The maturity amount also allows tax benefits under section 10(10D). |
To Conclude
Both the guaranteed return investment plans and fixed deposits help individuals to create corpus for life or to save enough for the future. Fixed deposits are schemes that help a person to create the routine of saving. On the other hand, life insurance policies allow individuals with financial security to deal with sudden uncertain events in life.
As per the need, one can choose the traditional fixed deposits or the guaranteed return plans to suit them as ideal investment products. For long-term gain and guaranteed returns and to accumulate a corpus for future, you can try out the fixed deposit plans. On the other hand, if you are looking at dual benefits to protect life and to secure a family, you may consider investing in a guaranteed return insurance product.
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Fixed deposits are best for both short- and medium-term investment goals, whereas life insurance plans are designed for long term savings. Further, you get tax benefits with life insurance along with other facilities like premature withdrawal after the lock-in period, availability of loan on investment etc.
Both Fixed deposits and life insurance have their unique qualities and suit different people with different investment purposes. FDs are purely designed for investment and savings related needs. Hence, if you intend to save and invest for the future, FDs are highly recommended.
Yes, the GRPs are good because not only they allow you to save for the future, but also help in saving tax.
Guaranteed return plans are perfect for fulfilling long-term investment goals. The GRPs are not affected by market volatility. They offer assured return on investments over a certain period of time mostly as a lump sum amount at maturity. Some of these plans may allow the option of monthly payments or a combination payment option for the insured.
PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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